Disaster Fundraising and Fiscal Agents
By Terry Knowles, Registrar of Charitable Trusts
The tragedies of 9/11, the Tsunami, and most recently Hurricane Katrina have given rise to a new phenomenon known as "disaster fundraising". Generous donors have opened their wallets and made charitable donations to help the victims of these disasters at a level unprecedented before September 11, 2001. While the majority of donors send their checks to large well-known charities like the Salvation Army and the Red Cross, others want to become personally involved in the fundraising effort by starting their own nonprofits. Given the cost, complexity, and time required to obtain 501(c)(3) status, these groups often seek a quicker, more cost effective way to raise funds and may turn to established local charities for assistance. Because the need in these situations is so great and the timeframe for fundraising so short, existing charities may be tempted to enter into a fiscal agent relationship with these well-meaning groups. The term “fiscal agent” refers to an organization that has already established its corporate and tax-exempt status and who is willing to be a "parent organization" to a group that wants to apply for a grant or solicit funds for a specific nonprofit purpose. Before your organization considers becoming a fiscal agent remember you will be lending your 501(c)(3) status to this new group and will therefore be legally responsible for its fundraising activity and reporting obligations. While these relationships can be successful they can also create problems if not properly structured. The board of directors should therefore consider all aspects of the proposal and proceed with caution before making its final decision. Careful planning in the beginning will help insure a positive outcome for both parties at the conclusion of the project. Further information regarding the fiscal agent relationship is available from the Charitable Trusts Unit. Feel free to call our office at 271-3591 and request the Fiscal Agent packet.
